Rolls-Royce says defence spending hike to create more UK jobs ‘without doubt’

The chief executive of Rolls-Royce has said a hike in UK defence spending will bring more jobs, grow the economy and help technology development in the country.

Tufan Erginbilgic said defence programmes “contribute to economic growth significantly” and more military investment “allows supply chains to be developed, allows labour skills to be developed”.

Pointing to submarine and fighter jet-related military programmes that Rolls-Royce is working on, he said scaling them up will “create more jobs in the UK without any doubt”.

Prime Minister Sir Keir Starmer announced a dramatic increase in defence spending earlier this week, saying it will rise from its current 2.3% share of the economy to 2.5% in 2027.

The policy comes in response to “tyrant” Russian leader Vladimir Putin and uncertainty over US President Donald Trump’s commitment to European security, while Sir Keir added that he wants defence spending to reach 3% of gross domestic product during the next parliament.

Rolls-Royce’s Mr Erginbilgic said defence programmes “help technology development in the country”, adding: “Developing sovereign capabilities for the UK will be even more important in this uncertain world.”

His comments came as Rolls-Royce lifted its profit forecasts and said it would buy back about £1 billion of stock from investors, causing shares to soar on Thursday morning.

The airplane engine making giant said operating profit for 2025 will be up to £2.9 billion, up from a previous estimate of up to £2.8 billion.

Shares rose as much as 15% on Thursday morning.

The buyback, meanwhile, is the first in 10 years at the FTSE 100 giant, which is also one of Britain’s largest military suppliers, making engines and power systems for large swathes of the military.

Those include engines for fighter jets in the Royal Air Force and nuclear reactors which power the Navy’s fleet of submarines.

The results mark a significant turnaround for the UK manufacturing giant, which was forced to raise emergency funding during the pandemic as the aviation industry stopped almost entirely.

Mr Erginbilgic joined in early 2023, and has since slimmed down the company as part of a major turnaround plan, including cutting 2,500 jobs from its roughly 50,000-strong workforce.

He has also battled with ongoing supply chain issues which have hampered Rolls-Royce’s financials in the years since the pandemic, which the company said would likely carry on for another year to 18 months.

Rolls-Royce said on Thursday that the issues will cause a £150-200 million hit. It said this is “similar to 2024, with parts availability remaining constrained”.

The company said it would hit its “mid term” profit goals, set in 2023, two years ahead of schedule.

Its underlying sales rose by one sixth to £17.8 billion in 2024, while its cash generation almost doubled to £2.4 billion.